Pullback Ahead of Another Upleg for Treasuries (TLT)
The yield on the 10 year T-note hit a reaction low of 4.49% this morning, down from 4.96 on 1/26. What next? Let's take a look at the iShares Lehman 20 Yr Bond ETF (AMEX: TLT).
The big question is whether or not Tuesday's spike to 91.28 (during the "mini-crash" in the equity markets) represented the end of the upleg off of the 1/29 low at 86.60. Although I can make a case that my near-term work points a bit lower, my intermediate-term work is so constructive that I have to expect the TLTs to pull back and consolidate above 89 in the upcoming hours ahead of another upleg that will confront and hurdle the December high -- on the way to 94-95 thereafter.
Why? A confluence of forces could be at work -- - weakening U.S. economy, flight to safety considerations in a deteriorating equity environment, and ongoing credit risks (subprime disease). All of these could be impacting the 10-30 year Treasuries.